Perfect for this thread <g>
Who needs new economy? Coal is hot
Stocks of now-precious commodity soar on energy woes
By Russ Britt, CBS.MarketWatch.com
Last Update: 4:51 PM ET May 17, 2001
NEW YORK (CBS.MW) - What company had lower revenue and operating income, lost
money the last two years and somehow grew its stock price nearly six-fold over the last 12
months?
The answer is St. Louis-based Arch
Coal Inc. (ACI: news, msgs, alerts) .
The stock hit a new 52-week high
Thursday as President Bush announced
plans for a new national energy policy.
See related story.
But what's true for Arch applies to just
about any of the handful of coal
producers left in the U.S.
The sector is in the black for a number
of reasons, not the least of which is
California's electricity problems that
seem to be spreading to the rest of the
nation. This sudden, newfound demand
for an old-world commodity has tripled
coal's price in the western U.S. and
doubled it elsewhere.
"Something you couldn't give away a year ago you can't buy today," said Michael Beall, analyst for
Davenport & Co. "We've gone to a very, very tight market."
So Arch, Consol Energy Inc. (CNX: news, msgs, alerts) and Massey Energy Corp. (MEE: news,
msgs, alerts) - the nation's biggest publicly traded coal producers - are enjoying huge runups in their
stock prices.
Arch's stock price stood at $6.58 a year ago and closed at $35.85 Thursday, up 65 cents. Consol
traded at $11.25 a year ago and ended up at $39.96 Thursday, down 3 cents.
And Massey was $8.77 a year ago, dipped to $7.32 in late summer, and has nearly quadrupled since
hitting that bottom. Massey closed Thursday at $27.55, up 85 cents.
All three had similarly lackluster financials the past few years, but each is expected to change that
between now and 2003. Massey is expected to earn 18 cents this year but $1.78 next year. Consol
will go from $1.65 in 2001 to $2.49 in 2002. Arch is climbing from 64 cents to $2.30, analysts say.
"The earnings are coming (now) but they're going to explode in 2002 and 2003," Beall said.
It represents a breath of oxygen for a sector that had been left for dead by Wall Street. The sector
has declined steadily over the last two decades. In the last half of the 1990s, warmer winters, a
collapse of the export market and heavy restrictions on coal use all sent the industry into a deep
nosedive.
A colder winter, tightened supplies, higher energy demand and increased reliance on coal - it powers
51 percent of the nation now - all have added up to steeper prices of the commodity and stock prices
for companies that produce it.
Coal remains attractive to some because it's cheaper than natural gas by far. Some companies are
building coal-fired plants in order to meet rising energy needs.
If that's not enough, another company is taking a cue from the dot-coms of the late 1990s and will
soon have an initial public offering. Peabody Energy, another St. Louis-based coal firm, is expected
to trade shares in coming weeks.
Peabody was a public company from 1929 to 1968, after which it began an era under the wing of
several owners. That lasted three decades, and it now has come full circle. Peabody officials declined
to comment on the impending offering. |
